Great Correction Expectations

Americans may have fretted a bit over the holiday weekend. The news has been bad. At least, if you regard a correction as bad.

California is cutting its payroll and putting others on minimum wage salaries.

Illinois has run out of money and stopped paying its bills.

The stock market is going down. Bond yields are at record lows.

The housing credit has expired. The clunkers have all been crushed. Census workers are being awarded medals for counting above and beyond the call of duty…and sent home.

The feds’ stimulus didn’t stimulate…their recovery didn’t recover…their counter-cyclical fiscal policy didn’t counter much of anything. And now it’s all running out…and we’re beginning to see the word ‘depression’ used to describe America’s malaise:

“Dow repeats Depression pattern,” says an item on CNBC.

US “trapped in Depression,” says a headline at The Telegraph in London.

And the cruel Senate told those whose unemployment benefits have run out to ‘go fish.’

“Recession Jolted Most Americans into Cheaper Living,” said a recent Bloomberg headline.

That’s what you’d expect in a Great Correction. But who expected a Great Correction? Not many people. Instead, most expected a recovery.

Whatever is going on, a recovery is not it.

There were fewer jobs at the end of June than there were at the beginning of the month – 625,000 fewer. The Labor Department reported that the unemployment rate went down to 9.5% but everybody now understands that the numbers are fraudulent. The feds are just disappearing people from the unemployment rosters. In fact, they dropped 1 million Americans off the list in the last two months. These people are not ‘actively’ seeking employment, they say.

But it now takes 35 weeks, on average, from losing a job to finding a new one – if you’re able to find a new one. That’s about half again as long as it took in the worst job market of our lifetimes, during the late ’70s.

With five people available for every job opening, naturally, a lot of people don’t find work and give up. Bad odds.

We only actively looked for a job once in our lives – in the early ’70s. We had gotten out of college. It was time to start a career. So we looked in the paper for jobs in journalism, for which we were completely untrained. We saw an opening in Washington, DC, at a newsletter company. We put on a suit and went for an interview.

The interview went well. But we didn’t get the job. They wanted someone with a better haircut or a better resume. Either way, it did not look like job hunting was going to work out for us. Fortunately a friend needed help. He paid $100 a week. That wasn’t much. But it was a start. We stuck with him until we were able to start our own newsletter company.

Pity the poor people who are looking for a job now. Nearly 8 million jobs have been lost in the last 3 years. Many of those jobs will never come back. Recovery? Forget it. Who’s going to build McMansions ever again? No one. They are relics of the Bubble Age…historical artifacts – like a Chrysler Imperial with huge fins from the ’70s…

But wait…it gets worse. Because even people who are working are earning less money. Hourly wage earnings are falling.

Hey, maybe China will get out of this slump? No, China’s economy is slowing down. And Ken Rogoff says its real estate market is beginning to collapse.

Fortunately, (and here you see our Daily Reckoning sunny side coming through the clouds) a great correction is just what the country needs. Remember, you can’t make bad decisions good or make debts disappear. You have to work through them…write them off, pay them off, default, foreclose, Chapter 11 or Chapter 7. That’s what we have corrections for.

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About Bill Bonner:

Since founding Agora Inc. in 1979, Bill Bonner has found success in numerous industries. His unique writing style, philanthropic undertakings and preservationist activities have been recognized by some of America’s most respected authorities. With his friend and colleague Addison Wiggin, he co-founded The Daily Reckoning in 1999, and together they co-wrote the New York Times best-selling books Financial Reckoning Day and Empire of Debt. His other works include Mobs, Messiahs and Markets (with Lila Rajiva), Dice Have No Memory, and most recently, Hormegeddon: How Too Much of a Good Thing Leads to Disaster. His most recent project is The Bill Bonner Letter.